It isn’t like the cola wars, where Mastercard and Visa are fighting for turf like Coke and Pepsi, but rather two top players trying to protect their business models. But the metaphor in The Other Guy Blinked rang a chord as the UK Amazon site announced that they would no longer accept Visa credit cards. The trigger day to unplug was January 19; Amazon pulled back their directive on January 17, as reported by the WSJ.
Amazon is as popular in the UK market as in the United States. The Guardian, a UK paper, reports that “Amazon’s UK sales soared by 51% last year to a record $26.5bn (£19.4bn) as people trapped at home due to the coronavirus pandemic lockdowns turned to the internet retailing giant to buy items unavailable in closed high street stores and to keep them entertained.”
In the UK, it seems as if Amazon should be more concerned about the tax implications than credit card processing fees, which are just a fraction of the potential risk.
While Amazon celebrated the rise in revenue collected from UK customers, it did not state how much tax it paid in the UK last year. As a result, the company, which has made its founder and outgoing chief executive Jeff Bezos a $200bn fortune, paid just £293m in tax in 2019 despite the company collecting UK sales of $17.5bn that year.
Details of the leap in Amazon’s sales in the UK were contained in a filing with the Securities and Exchange Commission in the US after the tech company unveiled its latest global financial results on Wednesday night. They revealed that Amazon’s global revenue soared past $100bn in the most recent three months.
The resolution of the bout between Amazon and Visa will likely result in some price concessions. Still, as a U.S. Amazon user, a couple of basis points on pricing probably won’t keep me away from shopping at Amazon, where our family had 326 purchases last year. In addition, Amazon helped keep us away from face-to-face shopping during a pandemic, could deliver just about anything within 24 hours in our local market, and was price-competitive across the board.
And as for Visa, who doesn’t like to use a Visa card (or American Express, Discover, or Mastercard, for that matter)? Our not-so-secret weapon is to use the Chase Amazon Visa, which yields 5% rewards at Amazon and Whole Foods, along with other branded network card benefits. Last year, the card paid us back $785.78 in credit card rewards without an annual fee. I will take that any day.
Suppose you similarly engineer your credit cards. In that case, you will probably also use the American Express Blue Preferred for grocery shopping, which pays 6% at supermarkets and carries a $300 cashback. Or a Discover it with 5% category bonuses that double in the first year. And the Citi Mastercard Custom Cash Card is a nice option too. There are plenty of ways around the issue as a consumer if you simply read the credit card disclosures.
The Visa/Amazon dispute has more to do with the UK’s long exit from the European Union than anything else, so for this issue, I sit on the sideline counting my U.S.-based credit card reward points – and expecting delivery from Amazon, for something or the other, sometime today.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
